DUBLIN: The Irish government has paid almost half of the loans lend from the International Monetary Fund (IMF) under its 2010 bailout. Through this early payment Ireland succeeded in saving its hundreds of millions of Euros in future interest payments.
In a statement, the government said the repayment completes “a hugely successful year in improving Ireland’s debt sustainability.”
“The recovery in the Irish economy is under way, and we are seeing the positive benefits of a growing economy in job creation and in the public finances,” said Minister of Finance Michael Noonan.
The repayment underlines Ireland’s progress in recovering from banking and fiscal crisis that began in 2008 and forced it to seek financial help from the fund, the European Union, and a number of European governments.
The government earlier this year announced its intention to repay €9 billion ($11.22 billion) of loans using money raised through the sale of bonds to private investors. While the IMF charges an interest rate of 5% on its loans, the government can borrow from the bond markets around 2%.
The government said that as a result of the repayment, it will save €150 million next year and €750 million over the life of the loans.
The government has said it would sell more bonds in the first half of next year to repay a further €9 billion. The IMF loans were due to be repaid by 2023.
The IMF provided the loans as part of an international bailout arranged for the Irish government in late 2010. By that time, the Irish government had spent large sums propping up banks that faced heavy losses in the wake of a property market crash. Yields on Irish government bonds were surging as investors speculated on how much it would ultimately cost the government to repair the banking system, making it difficult for the government to finance itself on affordable terms.
Under its 2015 budget, the government aims to cut its deficit to 2.7% of gross domestic product, ensuring that it meets its pledge to the IMF and EU to bring it below the limit of 3% allowed under EU rules.
The deficit peaked at more than 30% of GDP in 2010, although that was swelled by the huge cost of bailing out the banks. But even without those costs, the deficit was 12.6% of GDP in 2011.
But earlier this month, the government received a boost from ratings agency Standard & Poor’s Corp., which raised its Ireland credit rating Dec. 5 for the second time in six months.